IRS Announces Voluntary Settlement Program To Reclassify Workers As Employees

A new IRS voluntary settlement program offers significant relief from liability for unpaid federal employment tax, penalties and interest for eligible taxpayers that agree to voluntarily treat their misclassified workers as employees.

On Wednesday, September 21, 2011, the Internal Revenue Service (IRS) issued Announcement 2011-64, which details a new program that allows eligible taxpayers that agree to voluntarily treat their misclassified workers as employees going forward can get significant relief from liability for unpaid federal employment tax, penalties and interest.

Background

The classification of a worker as an employee or an independent contractor is a complex factual problem involving many factors under the common law definition of "employment." The issue of worker classification has been a significant area of IRS enforcement for decades. In response to a flood of litigation and complaints of overly aggressive enforcement by the IRS, Congress enacted